Nokia's luxury model phone a hit in Europe

Nokia's new 'Signature Cobra' mobile phone

PARIS - The luxury unit of the world's top mobile handset maker Nokia sees a booming market for mobiles studded with diamonds as the super rich snap up its latest 270,000 euro ($516,636.14) phone faster than it can make them.

Vertu's "Signature Cobra", a sapphire and gold phone with a diamond and ruby snake slithering down its sides, was launched two weeks ago in Paris and Mumbai, aimed at the growing ranks of the world's wealthy.

"So far we are selling them faster than we are making them," Vertu President Alberto Torres said in an interview at the World Luxury Congress in Paris.

"We have only made two and we have already sold five. We are only going to make eight."

Torres spoke to Reuters ahead of the third-quarter earnings release from parent company Nokia, which said it booked 20 per cent higher sales of 10.1 billion euros, thanks in large part to robust demand for cheap phones in emerging markets.

Vertu, one of Nokia's smallest but most profitable units, is banking on demand from those same regions. But whereas Nokia's cheap handset sales led to a lower operating margin of 13 per cent, margins at its luxury line are still above 20 per cent, Torres said.

Beyonce and David Beckham are among its most famous clients, but Vertu, together with French jeweller Boucheron, launched its glittery "Cobra" phone in Mumbai because it expects a chunk of its future clientele to be the subcontinent's newly rich entrepreneurs and Bollywood stars.

"India is not one of our largest markets, but it is a market that we think will be very big in the future," Torres said.

While analysts expect Nokia to sell about 330 million phones this year at an average of around 100 euros apiece, Vertu sells tens of thousands of phones at prices rising from 3,500 euros to 270,000 euros.

Yet Torres said he could see that niche market swelling to more than a million phones in the short term and possibly more in a decade's time.

"We are talking about a very sizeable market," he said. "In ten years, or a bit longer, it could be 1 per cent."

Torres said Vertu's annual growth had doubled so far this year, a rate he expected to continue for "the next few years". This year's growth could have tripled, he added, were it not for supply constraints.

Nokia is not alone in targeting the luxury mobile market. Rival Motorola has teamed up with designers Dolce & Gabbana to launch a gold-coloured version of its best-selling RAZR.

But while Motorola's RAZR aims for lower-end "accessible luxury", Vertu wants to replicate the success of high-end luxury watches, where 1 or 2 per cent of sales can account for 30 per cent of total industry value.

"We want to get to the kind of volumes you expect with the very best brands, like Patek Philippe and Rolex," Torres said.

The number of individuals worldwide with at least US$1 million in financial assets grew to 8.7 million in 2005 from 4.5 million in 1996, Merrill Lynch and Cap Gemini said in a recent report.

Torres said the trend meant Vertu saw no global limitations to its growth. It now sells to Europe, the US, China, the Middle East and India and will shortly expand into South America and by 2008 to Japan, the world's biggest luxury market.

"There is an appetite for luxury products everywhere in the world," he said.

- REUTERS